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Finance Chiefs Fail to Agree on Debt Relief

October 29, 2009 1:39 PM

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Finance Chiefs Fail to Agree on Debt Relief

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Outgoing World Bank President James D. Wolfensohn, right, and Development Committee Chairman Trevor Manuel, the Finance Minister of South Africa, left, take questions as they complete two days of meetings at IMF headquarters in Washington

Finance chiefs from leading economic countries ended a weekend meeting Sunday, saying they made some headway on wiping out the debt for the poorest countries. But they failed to reach an agreement.

The finance ministers from the Group of Seven countries and the policy-making body of the International Monetary Funds warned the rise in oil prices poses a risk for world economies, but stressed the current economic outlook looks good.

But at Sunday's meeting, South African finance minister Trevor Manuel called attention to the need for rich countries to boost the flow of resources to the poorest. He said the Millennium Development Goals (MDGs) set five years ago can not be achieved without new money. So you've got to push the boundaries because the funding deficit in respect to the MDGs-as well as growing the productive side of very poor economies, that deficit is huge. So you're not going to do it on current resources. So additionality (of money) is the first principle," he said.

The millennium development goals call for a 50 percent reduction in global poverty by 2015. Because of stunning progress in reducing poverty in China and India, the World Bank is optimistic that the millennium targets can be met. Over 300 million people in China and India have advanced beyond extreme poverty in the past decade.

The meeting made some progress in resolving technical differences over writing off the debt of the poorest African countries. But the finance chiefs did not iron out the difference between separate proposals from the United States and Britain on how pay for it.

The finance ministers from the world's seven richest countries agreed the global financial system is out of balance and policies must be adopted to prevent what they called an abrupt market correction.

But the U.S. government, whose huge budget deficit is seen as one of the main reasons for the financial imbalance, revealed no new plans to balance the budget.

China, under pressure for refusing to revalue its currency, did not participate in the Washington meeting of the group of seven.